Bloomberg News

Shell May Get Pennsylvania Tax Windfall for Ethane Plant

June 05, 2012

Pennsylvania Governor Tom Corbett is asking state lawmakers to authorize $1.65 billion in tax credits for Royal Dutch Shell Plc (RDSA), Europe’s biggest oil company, in exchange for building a chemical plant near Pittsburgh.

The commonwealth competed with Ohio and West Virginia to attract Shell’s investment in a so-called ethane cracker, which would use the natural-gas byproduct to make raw materials for plastic. In March, The Hague-based Shell said it had an option for a site northwest of the state’s second-largest city.

Corbett, a Republican, wants to give buyers of ethane such as Shell a credit of as much as 20 percent of tax liabilities, said Steven Kratz, a spokesman for the state Community and Economic Development Department. The 25-year incentive would begin in 2017 and amount to about $66 million a year for the company, Kratz said yesterday by telephone.

“This is about growing an industry that would reindustrialize Pennsylvania and create tens of thousands of jobs,” Kratz said. The site Shell has the option to buy is in Potter and Center Townships near Monaca, about 27 miles (43 kilometers) northwest of Pittsburgh.

The boom in natural-gas production from the Marcellus shale formation is helping to propel Pittsburgh employment toward surpassing its record high, reached in 2001, according to Wells Fargo Securities economists. Almost 2,000 Pennsylvania wells were drilled in 2011, up from about 200 in 2008, according to the state Environmental Protection Department.

Jobs Engine

Gas production may create more than 100,000 jobs through 2020 in 14 counties near Pittsburgh, the Wells Fargo economists led by Jay Bryson said in a March report. Corbett has said he wants the state to be the “Texas of the natural-gas boom.”

The credit for Shell would be in addition to a previous package of incentives passed by the Legislature earlier this year to lure the company. That arrangement provides 15 years of tax breaks for businesses in designated areas of the state.

The deal with Shell hasn’t been finalized, Kratz said. The company is still weighing an investment decision in light of state incentives, a spokeswoman said.

“We will carefully consider it as one of a variety of factors to determine the economic viability of our proposed petrochemical project before taking an investment decision,” Kayla Macke, the spokeswoman, said by e-mail. “Shell supports and endorses incentive programs provided by state and local authorities that improve the business climate for capital investment, economic expansion and job growth.”

Lawmakers Examine Deal

Democratic lawmakers, who are in the minority in both the state House of Representatives and the Senate, asked Corbett for more information on the latest incentives for Shell.

“It is critical that the Legislature and the citizens of Pennsylvania have all the time possible to examine, consider and possibly amend a plan that could have costs and implications well into the next generation,” Senators Jay Costa, Vincent Hughes and John Wozniak, all Democrats, said yesterday in a letter to the governor.

To contact the reporter on this story: Romy Varghese in Philadelphia at rvarghese8@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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